The Change at C.A.O.

Now among the hottest of cigar brands, Nashville's C.A.O. began life as a pipe maker

A waitress brings another round of beers to the big table
at El Torito, the best restaurant in Danlí, Honduras. The churrasco
steak dinner is a recent memory, and the men reach for dark cigars as they
continue talking about tobacco. The snap of several lighters is heard, then cigar smoke begins to rise
as raindrops sneak through the leaky roof, plopping to the green
tablecloth.

The party includes three career tobacco men, two with
decades of experience, but the star of the table is one of the youngest men
at the dinner—34-year-old Tim Ozgener. The wide-eyed, energetic
former comedian comes to life in the dark of the room, bringing some of the
men to tears with his jokes.

Ozgener once called the comedy clubs of California his
home, but today he spends increasing time in Central America as a vice
president of C.A.O. International Inc., the Nashville, Tennessee, company
that owns some of the hotter brands on the American cigar market. Once a
sleepy company that made most of its money from pipes and humidors, C.A.O.
has redefined itself over the past decade, abandoning the humidor industry,
pushing pipes to the back burner and immersing itself in the cigar
business. The reason was simple economics.

“We started out with pipes, but pipes are now two
percent of our business. If we were just pipes, I wouldn’t be
here. As my dad says,” Ozgener explains, slipping effortlessly into
an exaggerated version of his father’s accented voice,
“‘Humidors don’t burn. Cigars burn, and then you have to
replace them.’”

Replacing them has kept the small, family-owned company
busy. C.A.O. is privately held and doesn’t disclose sales figures,
but Ozgener says cigar sales have quadrupled
since 1998.

C.A.O. was created by Tim’s father, Cano
(pronounced Johnno), an Armenian Turk with a penchant for smoking cigars
and pipes. He favored meerschaums, the white pipes made from a claylike
material called magnesium silicate. These porous pipes are often carved
into shapes, some of them extremely ornate; the carvers of Ozgener’s
native Turkey are particularly gifted at turning the pipes into works of
art.

Cano, who emigrated to America in 1961, graduated from
Columbia University as an engineering major and wished to stay in New York
City, but that changed when he met Esen, his wife-to-be. “I love New
York,” he says. “When you follow a woman in life, many strange
things happen to you. She wanted to raise her family in a quiet
place.”

That quiet place was the South. Ozgener moved to North
Carolina in 1964, then to Nashville in 1968, working as an engineer at
DuPont. A natural tinkerer, he began modifying the stems of pipes to
improve their performance, sold a few to friends and tobacconists, and
created a business in 1968. “My father basically started C.A.O. from
the basement of his house,” says Tim. In 1977, he left his
high-paying job at DuPont to form his own company, naming it after his
initials.

C.A.O. made a first attempt at the cigar business,
in 1980, with a brand called Casa de Manuel. “We learned everything
not to do,” says Cano. Consistency problems compounded the
difficulties of a dying market, and Cano retreated to pipes and the
company’s fledgling humidor business. C.A.O.’s first humidors
were antique boxes that the company retrofitted with humidification
devices, and later it had humidors made specifically for C.A.O. by local
Nashville artisans. The company even had its own humidification system. In
1995, C.A.O. began to sell cigars again, a Honduran smoke made by Nestor
Plasencia called simply C.A.O.

The cigar boom was in full swing, and getting a
consistent product wasn’t easy. The early C.A.O.s didn’t light
the world on fire. Tim remembers being embarrassed during his visits to
retailers. “The guys would say, ‘Tim, we like you, but look at
this box of C.A.O. cigars.’ One would be chestnut-brown, the other
would be yellow.”

A production problem on the original C.A.O.
line—which now is available in limited form and is known as C.A.O.
Black—led to the company’s first cigar success. “Our
biggest hit was the maduro,” says Cano. “That was created in a
snafu. We had a beautiful maduro, but it didn’t burn well, so we
called it back. We had about 100,000 to 150,000 cigars we had to
recall.”

The recall, along with product shortages, prompted
the Ozgeners to look for an additional supplier of cigars. They eventually
hooked up with Douglas Pueringer, owner of Tabacalera Tambor in Costa Rica,
where Bahia cigars were made. Pueringer made the Ozgeners a spicy, black
maduro, which they packaged with a red band that borrowed heavily from
Cuba’s Partagas Serie D No. 4.

“That put us on the map,” says Aylin
Ozgener, 31, Cano’s daughter, and the other vice president of the
company. She’s a quiet woman with a surprisingly tough job—she
hires and fires salespeople, and collects on accounts. “Our goal for
sales is to get all our lines in the stores,” says Aylin. “To
try to increase our shelf space.” That’s a decidedly tougher
task than just a few years prior. C.A.O. has expanded its range of cigars
dramatically. In eight years the company has gone from one cigar brand to
seven major brands: Gold, Brazilia, Criollo, Double Maduro (or MX2) and
three versions of L’Anniversaire: Maduro, Cameroon and eXtreme. The
company also markets flavored cigars, plus has several specialty lines,
including the reincarnated Black and a 65th Anniversary Cigar made to honor
Cano’s 65th birthday.

None are made by Pueringer, who abruptly ended his
business relationship with the Ozgeners by a breakup fax in 1999. (He
would later retire from the cigar business.) Pueringer’s move left
C.A.O. in the lurch. “Seventy percent of our cigar sales were from
the maduro at that point,” says Cano. But Pueringer’s surprise
move turned into a boon for C.A.O., which found a replacement manufacturer
in Nick Perdomo later that year. Perdomo began making the maduro blend, and
soon after gave C.A.O. a Cameroon-wrapped cigar, which Cano had craved for
years. The first samples barely made it to the industry trade show in 1999.
“I brought 1,000 cigars in my luggage into Miami through the
nothing-to-declare line,” says Tim with a smile.

C.A.O. added cigar brands through the years, and
eventually expanded its coterie of cigar companies that made its brands:
the Toraño family began making C.A.O. Brazilias in Honduras and La
Aurora started creating the flavored cigars in the Dominican Republic.

In 2003, the Ozgeners made the shift from mere
marketer to cigarmaker, buying two cigar factories in Central America, one
in Estelí, Nicaragua, and one in Danlí, Honduras, to give it
more control over the production of its cigars. (The term cigar factory is
loosely applied here—each C.A.O. factory is inside a building that
also contains a cigar factory owned by the Toraño family. In
Nicaragua, the dividing line is invisible, about halfway through the
rollers’ gallery. In Honduras, C.A.O. workers sit on one side of the
building, Toraño workers on the other.)

The shift gave C.A.O. more control over its tobacco
supply and quality control, as well as improving margins by cutting out a
middleman. Soon after the move was made, C.A.O. switched production of its
maduro brand from Tabacalera Perdomo to C.A.O. Fabricas de Tabacos in
Nicaragua.

The production of the C.A.O. and Toraño
factories on both sides of the border is managed by Fidel Olivas, 49, and
three of his six sons. Most cigar factory managers are Cuban; Olivas is
Nicaraguan. “Fidel’s goal is to be known as one of the great
Nicaraguan cigar men,” says Charlie Toraño, Tim’s
counterpart from the Toraño family. Olivas buys tobacco for
Toraño and C.A.O., and the close working relationship between the
midsized cigar companies allows them to get better prices on tobacco.
“If we come across some great tobacco, we can buy it together,”
says Tim. “It gives us more buying power.” His father seems
slightly obsessed with establishing solid tobacco inventories. “You
have to have a supply that can last you at least two years,” says
Cano. Tim says he often catches Cano watching The Weather Channel, worrying
about damage to planted crops. “ ‘Who cares about the
Midwest?’ ” says Tim, doing another Cano impersonation. “
‘What about Ecuador?’ ”

New brand launches are practically an annual event
for the Ozgeners, but the lines tend to stick around. “A lot of cigar
companies replace lines if they don’t work for
them—that’s not our intention. We believe in each
product,” says Tim. “The Gold—most companies would have
just ceased that line. We worked hard to relaunch that line. When you come
up with a great blend, our objective is not to abandon that blend.
It’s really easy to sell what’s new and what’s hot, but
you also have to remind people about a great blend.”

The Ozgeners are marketers, and seem unafraid to test
the boundaries of normal cigar advertising. Early ads featured nude women
smoking double coronas. The current ad campaign shows the three Ozgeners
decked out in black. Tim looks like a club hopper, with his scruffy goatee,
shaved pate and a cool scowl as he blows on the lit end of his cigar. His
sister is goth chic, replete with black lipstick. Cano, wearing a suit, is
looking on from the left, appearing somewhat bemused.

The tagline challenges the notion that Cuba makes
the best cigars in the world with the statement: Cuban Shmooban. It’s
copy that attracts some, angers others, but is hard to ignore.

Today, C.A.O. is experiencing growing pains. The
company occupies cramped, charmingly dumpy headquarters in west Nashville.
It’s a residential area, with cheap rent. Aylin shares an office with
Cano; Tim shares an office with Mike Conder, a consultant who once worked
for General Cigar Co. and La Flor Dominicana. They are the lucky ones. Most
of the remaining staff sit in odd-shaped cubicles, which fill the space,
which also serves as a warehouse. The company has no loading dock. Each
shipment has to be broken down and hand-carried out the back and around the
corner where trucks have access. It’s a smaller than expected
operation, with 19 employees.

“We are very happy with the road we have
made,” says Cano, 67. He’s philosophical, with an easy smile,
an ever calm demeanor, and a self-deprecating wit he’s passed on to
his son. His mood reflects the yoga he has practiced for the past two
decades, and a recent scare with non-Hodgkin’s lymphoma—now in
remission—has made him even more spiritual and reflective.

“We are performing through our cigars,”
he says. “My daughter and my son have done a wonderful job. I compare
it to the performance of a ballerina doing Swan Lake. There is the part of
playing the notes and there is the part of feeling the notes…if they
know how to combine the physical self with the spiritual self, they will be
a better person overall.”

His children get the message. “We’re
making a product that’s making a lot of people happy,” says
Tim. Adds his sister: “We really enjoy what we do.” That much
seems obvious.

Back in Danlí, the sun has set on another
workday. The C.A.O. and Toraño workers file out toward the
Pan-American highway as the rain begins to fall again, and the owners of
the building settle into the back office. Tim Ozgener plops into one chair,
Charlie Toraño another. The men are opposites, Ozgener short and
bubbling with energy, Toraño tall and lanky and quiet. Bundles of
unbanded cigars are spread across the table, ready for test smoking.

The men light cigars and settle into easy
conversations about life, music, playing the guitar and raising families.
They move from one cigar to the next, evaluating the blends of the day.
Tim, a visual thinker, turns to his notebook, filled with sketches of
tobacco leaves and cigar boxes.

Ozgener obsesses about the cigar: how it burns, how
it looks, but overall, how it tastes.

“We want to have style,” he says,
“but we don’t want to be just glamorous. We want to have
substance, too.”